Supply Chains are the Butter in the Croissant

Show Notes

This week started with rubber and somehow ended with the soul of trade. I'd just come back from touring rubber-mixing facilities up near Toronto and outside Cleveland — hundred-year-old factories with Corinthian columns and trussed roofs, the kind Dan and I both grew up around in the Midwest — and I got to nerd out about carbon black, the micro-fine powder that turns clear, useless rubber into the black stuff you trust on a tire. Touch the handrails in an old mixer and your hands look like you came out of a coal mine; blow your nose at the end of the day and you'll see what I mean. It's a dirty, beautiful, invisible business, and almost nobody thinks about it. Which, it turns out, is the whole episode.

Because the real news on my front was the longshoremen. The ILA had just postponed their strike to mid-January, and Dan and I watched a lot of normally pro-labor people sour on this one in real time. It wasn't only the greed — the union boss with the mansion and the watches and the Cartier glasses — it was that so many of the demands were anti-progress, anti-safety. Mechanical lifting is one of the most dangerous jobs in the industrial world; people still get hurt and killed when loads shift. Look at Rotterdam, look at the Asian ports — they automated, and they're nearly injury-free. Yes, automation engineers out jobs. We said it plainly: it's going to happen anyway. The honest move is to ask how we manage that transition inside our labor force, not to forbid it and let our coasts rot while we fall behind. And the people who pay the price for a creaky port aren't the ones with money — it's everybody else.

That's where Dan's line came in, the one I'd texted him: supply chains are like the butter in the croissant. When everything's cool and laminated, the butter holds all those thin layers of dough together. When it gets hot, it blows them apart into something poofy and crispy — which is wonderful in a croissant and catastrophic in a supply chain. Pull out free trade, pull out the ports humming at 110%, and we lose the thing that lets specialized labor forces around the world actually feed into each other. Even if we made more here, we'd still need those ports running — the raw materials come through them regardless, and we'd want to ship our high-end stuff back out.

Which got us to the manufacturing myth. I poked fun in a past episode at the idea of fighting to bring stamped little pieces of metal home, and I wanted to expand on it: I don't want a 20-cent wall cleat made in America at eight bucks. What I want home is the hard stuff — airplanes, small nuclear reactors, the kind of kill-capable drones you genuinely don't want manufactured entirely somewhere else. The strategic capacity, existing and expandable, the way GM and Ford flipped from cars to tanks in WWII. The automation that gets there won't look like the humanoid robots people picture; it looks like purpose-built droids, one operator running a line of sixteen presses with their fingers nowhere near the dies.

Then the back half went where our episodes always seem to go — somewhere we didn't plan. Dan walked through the first carbon-credit fraud case to ever cross the wire: a developer caught manipulating data on cookstoves in Zambia and Malawi, the stoves breaking down in the field while the books got cooked and a backer got fleeced for over a hundred million. Dan had basically called it earlier in the year — not the specific company, but that the fraud was coming, because that's what happens when an honest idea like ESG attracts people who only smell a buck. From there we spun out into labor arbitrage and whether the world reverts to the mean, the atomization of culture since the war, memetic investing, blue chips that are really just memes nobody will let die, and using GPT as a Harvard-4.0 intern that asks you clarifying questions. We earned our names today — totally unqualified — but somewhere in the middle of the rubber and the croissants, I think we said something true.

The butter only works when it's holding the layers together. Heat it up, and you get something delicious to eat and impossible to live in.

— Sean